Online Holiday Sales Seen Up 8 Percent

NEW YORK (Reuters) - U.S. online sales are expected to rise 8 percent this holiday season, with mass market retailers who can offer discounts performing best, according to Forrester Research Inc.

The research firm said on Monday it expects online retail sales in November and December to reach $44.7 billion this year, up from $41.4 billion a year ago, providing a bright spot to a retail industry that could see total sales fall.

"Despite the lingering effects of the global financial crisis, the online space remains the retail industry's growth engine," Forrester said in its report.

Last year, total holiday sales logged their worst performance in nearly four decades after consumers cut back onspending in a global financial crisis. Online sales rose only 5 percent last holiday, breaking a multiyear streak of double-digit gains, according to Forrester.

This year, as consumers grapple with rising unemployment and decreased access to credit, retailers are gearing up for another tough holiday season. The National Retail Federation has forecast that total holiday sales will decline 1 percent.

In the past year, consumers have traded down to shop at Wal-Mart Stores Inc and other mass merchants.

"We expect this behavior to continue this holiday season because, given the current state of the U.S. economy, 24 percent of online holiday buyers intend to try lower-cost alternatives to the brands they typically purchase," the report stated.

Indeed, Wal-Mart has been expanding its online offering. Walmart.com is now selling health and beauty products, and it recently ignited a price war with Amazon.com Inc, by slashing the price of highly anticipated hardcover books.

For its part, Amazon forecast that sales during the holiday quarter could far exceed Wall Street's early estimates.

While online sales are expected to rise, they still account for a small portion of total holiday sales. Last year, holiday retail sales totaled $441.97 billion, according to the NRF.